When Benoît Verdier co-founded perfume house Ex Nihilo in 2014, he and his partners set out to create the “Tesla of fragrance,” combining technology with classic raw materials through personalisation services at its Paris flagship. At the time, niche fragrance brands like Ex Nihilo were increasingly being noticed by larger entities: UK private equity group Manzanita Capital had just invested in Byredo the previous year. Estée Lauder scooped up Le Labo and Frederic Malle in 2014 and Kilian in 2016; not to be outdone, LVMH acquired Maison Francis Kurkdjian in 2017.

Ten years later, Ex Nihilo is now part of a second wave of niche brands catching the eye of investment groups and conglomerates: in January, Eurazeo acquired a minority stake in the Parisian brand worth roughly €25 million ($27 million). Later that month, Manzanita Capital announced the acquisition of Brooklyn-based brand D.S. & Durga. This, of course, followed Kering’s purchase of British perfumer Creed for $3.8 billion in its first major acquisition last year and Puig’s 2022 majority stake in Byredo reportedly worth $1 billion.

“Now our competition are these big guys,” said Verdier. “And if we want to compete against them, we need power.”

Brands like Le Labo showed consumers were willing to spend upwards of $250 in exchange for more unique, daring perfumes that showcased craftsmanship and ingredients rather than celebrity spokespeople and established brand names. That, along with the Covid-19 pandemic that propelled consumers to invest in personal care products, paved the way for a larger, more lucrative fragrance market today — and far more competition.

“[Before] you were competing with five people. You’re competing now for the same space with 20 people,” said Laurent Droin, managing director of Eurazeo, which previously invested in fragrance brand Nest and beauty brand Gisou.

That means niche brands need to fulfill a tall order to make themselves attractive to investors who can help them grow, namely a hero product, authentic storytelling and a foothold in growing markets like China. The cost of growth? Their niche credibility.

“You dilute the value of the brand,” said Alessandro Brun, professor at the School of Management of Polytechnic University of Milan and co-founder of perfume house Masque Milano. “[But] you don’t care if you’re not really as niche as you used to be because of the money you make at the end of the day.” Brun died earlier this month, according to a tribute posted on Instagram by Masque Milano on Feb. 20.

There are still many brands readying for their next steps. Founded in 2016 by David Benedek, BDK Parfums has a hit fragrance in 2019′s Gris Charnel, worldwide stockists from Dubai to Shanghai and, as of January, its first store on Paris’ Rue Saint-Honoré — nestled between storefronts from Ex Nihilo and Le Labo. Matiere Premiere, founded in 2019 by seventh-generation French perfumer Aurélien Guichard, raised €1.3 million ($1.4 million) in funding in 2020, leading to its arrival in North America in 2022. Fueguia 1833, founded by Argentine perfumer Julian Bedel in 2010, received equity investment from Middle Eastern investor Ilwaddi WLL in 2021 and has since opened stores in the likes of Mexico City and Seoul, and collaborated with designer Gabriela Hearst.

“There’s a huge potential, so I don’t think this streak will stop anytime soon,” said Brun.

What’s In The Bottle

Ex Nihilo has roughly two dozen fragrances in its collection, including the Hailey Bieber-approved Lust in Paradise. But according to Verdier, around 70 percent of the brand’s 60 million euros in annual retail sales comes from just one scent: Fleur Narcotique, launched in 2014 as part of its debut collection.

Rather than limiting the brand, one product dominating sales makes it easier to build a snowballing effect that is key to growth. Creed has 2010′s Aventus as its star player while Parfums de Marly, the French brand founded in 2009 and acquired by Advent International last year, has built an empire around 2017′s Delina. But while a runaway hit is almost impossible to predict, Verdier adds, it’s also exactly what larger groups like L’Oréal are looking for when buying.

Brands like Creed, founded in 1760, or Santa Maria Novella, the Florentine perfumer founded in 1612 that recently named former Bottega Veneta executive Giovanna Paoloni as CEO, have had hundreds of years to convince consumers that their creations are worth the money. Newer names don’t have the same luxury, but they still need to establish trust through other means, whether that’s transparency around production methods, an elevated consumer experience or scents that drive trends rather than follow them.

For BDK founder David Benedek, opening his first store this year was crucial for deepening consumer bonds; in honor of the opening, BDK launched the scent 312 Saint-Honoré, created by perfumer Alexandra Carlin and inspired by the materials and design of the store. “We’re not looking for the trends, but speaking from our heart to our customer. And this authenticity I think attracts our customers and makes them loyal to our house,” he said.

An Eye to China

Global presence is mandatory for brands to take the next step, with markets like Latin America, India and the US especially ripe for growth. Experts say investment in six or seven relevant geographies at once is necessarily for growth. But one market offers ample opportunity — and risk: China.

“In other markets, the niche consumers would be mostly fragrance lovers and connoisseurs,” said Dao Nguyen, founder of Essenzia By Dao, a beauty consulting firm with a focus on the Chinese consumer. “Whereas in China, niche consumers can be anyone who is interested [in] discover[ing] fragrance because they just want to be unique.”

Jo Malone opened the door for Western niche fragrance when it expanded to China in 2014. Today, with a digitally savvy audience discussing fragrance on both Instagram and Xiaohongshu, or Red, Chinese consumers are already aware of Western brands far before they arrive in the country, said Nguyen, making strong online storytelling mandatory for tapping into those consumers. Loewe, which opened a perfume-only store in Nanjing in 2022, has generated particular buzz online thanks to its 001 perfume, whose name translates into Chinese as “morning after sex.”

But offline activations are also crucial.

In Jan. 2023, shortly before its purchase by Kering, Creed collaborated with Chinese brand Robbi on a scented toy for Lunar New Year. In May, Le Labo opened its first mainland store in a historic Shikumen building in Shanghai, and added a Shanghai scent to its city exclusive line later that year. Ex Nihilo opened a Hong Kong flagship last November, but navigating China’s legal restrictions and digital landscape was a key motivator in seeking outside investment, said Verdier. “The cost [of acquisition] per customer in China is maybe three or four times more than an American,” he said.

And the costs are only going up as Western brands are not just competing with other imports, but also rising local fragrance labels armed with capital. In December, Melt Season, founded by Gentle Monster alum Lishi Ni, received an early stage investment from Estée Lauder’s New Incubation Ventures. In February, L’Oréal invested in Chinese luxury fragrance brand To Summer through its local investment arm Shanghai Meicifang Investment; in 2022, it took a minority stake in Chinese perfumer Documents.

No Longer Niche

In the moment they sell to a larger group, niche brands sacrifice the exclusivity that brought consumers to them in the first place. But with designer lines like Chanel’s Les Exclusifs and Dior’s La Collection Privée taking a more limited distribution strategy, and the likes of Byredo and Jo Malone available at airports around the world, the line between niche and mass is no longer so clear.

“I used to teach ‘Small is beautiful,’” said Brun of his courses on luxury management. “Today I’m teaching ‘Big is beautiful’. Because if you’re bigger, you can have visibility. You can have a marketing budget, you can have shelf space. All things that the small brands will never have.”

But growth also needs to come at the right time.

David Benedek is already thinking of New York as a potential site for a second brick and mortar outpost for BDK, but he is not ready to cede control for scale just yet. “I’m proud to still be independent and have 100 percent of the shares at my company. I think it allows me to have liberty in my actions,” said Benedek.

While fans may lament their favorite brand selling out, the truly niche fragrance market won’t go away anytime soon; everytime a niche brand gets acquired by an Estée Lauder, there opens up room for another to fill the void.

“There will always be space for smaller brands in niche fragrance, because by definition, consumers are looking for a singularity,” said Droin. “As soon as a perfume becomes the new Chanel No. 5, the original [fans] will look for a new perfume.”